Case Study Description of Founder's Group Diversification
Founder Group's Chairman of the Board, Wei Xin, made adjustments to the company portfolio in 2010. Established in the mid-1980s, Founder is the industry leader for Chinese laser typesetting systems and was once the second largest PC manufacturer in China. It is also the largest university-based enterprise in China. After twenty years of development, Founder has achieved annual revenue of 47.5 billion RMB, with business in IT hardware and software, pharmaceuticals, medical care, finance, real estate, steel, trade, education, mining, fine chemicals, storage, etc. It has undergone highly unrelated diversification. Chair of the Board, Wei Xin, wants to ensure Founder's sustained growth. To this end, he must consider Founder's portfolio structure for the future.
Authors :: F. Warren McFarlan, Donghong Li, Chuanjiang Mao
Swot Analysis of "Founder's Group Diversification" written by F. Warren McFarlan, Donghong Li, Chuanjiang Mao includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Founder's Xin facing as an external strategic factors. Some of the topics covered in Founder's Group Diversification case study are - Strategic Management Strategies, and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Founder's Group Diversification casestudy better are - – there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, there is backlash against globalization, technology disruption, cloud computing is disrupting traditional business models,
increasing commodity prices, geopolitical disruptions, etc
Introduction to SWOT Analysis of Founder's Group Diversification
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Founder's Group Diversification case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Founder's Xin, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Founder's Xin operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Founder's Group Diversification can be done for the following purposes –
1. Strategic planning using facts provided in Founder's Group Diversification case study
2. Improving business portfolio management of Founder's Xin
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Founder's Xin
Strengths Founder's Group Diversification | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Founder's Xin in Founder's Group Diversification Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Founder's Xin in the sector have low bargaining power. Founder's Group Diversification has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Founder's Xin to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Founder's Xin is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Founder's Xin is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Founder's Group Diversification Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Founder's Xin has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Founder's Group Diversification - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Founder's Xin
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Founder's Xin does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Founder's Xin are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Founder's Xin has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Founder's Xin to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Founder's Group Diversification Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– Founder's Xin has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Founder's Group Diversification Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Founder's Xin is present in almost all the verticals within the industry. This has provided firm in Founder's Group Diversification case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Leadership & Managing People industry
– Founder's Group Diversification firm has clearly differentiated products in the market place. This has enabled Founder's Xin to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Founder's Xin to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Founder's Xin has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Founder's Xin has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to lead change in Leadership & Managing People field
– Founder's Xin is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Founder's Xin in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Founder's Group Diversification | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Founder's Group Diversification are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Founder's Xin is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Founder's Group Diversification can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Founder's Xin products
– To increase the profitability and margins on the products, Founder's Xin needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Founder's Xin has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
Founder's Xin has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High bargaining power of channel partners
– Because of the regulatory requirements, F. Warren McFarlan, Donghong Li, Chuanjiang Mao suggests that, Founder's Xin is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Workers concerns about automation
– As automation is fast increasing in the segment, Founder's Xin needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Low market penetration in new markets
– Outside its home market of Founder's Xin, firm in the HBR case study Founder's Group Diversification needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Founder's Group Diversification HBR case study mentions - Founder's Xin takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High operating costs
– Compare to the competitors, firm in the HBR case study Founder's Group Diversification has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Founder's Xin 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Founder's Xin has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Founder's Xin even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Products dominated business model
– Even though Founder's Xin has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Founder's Group Diversification should strive to include more intangible value offerings along with its core products and services.
Opportunities Founder's Group Diversification | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Founder's Group Diversification are -
Leveraging digital technologies
– Founder's Xin can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Developing new processes and practices
– Founder's Xin can develop new processes and procedures in Leadership & Managing People industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Founder's Xin can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Founder's Xin can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Low interest rates
– Even though inflation is raising its head in most developed economies, Founder's Xin can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Founder's Xin can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Founder's Group Diversification, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Founder's Xin can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Founder's Xin has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Founder's Group Diversification - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Founder's Xin to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Founder's Xin can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Founder's Xin can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Founder's Group Diversification suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Learning at scale
– Online learning technologies has now opened space for Founder's Xin to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Manufacturing automation
– Founder's Xin can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Founder's Xin to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Founder's Xin in the consumer business. Now Founder's Xin can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Founder's Group Diversification External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Founder's Group Diversification are -
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Founder's Xin can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Founder's Xin.
Stagnating economy with rate increase
– Founder's Xin can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Founder's Xin in the Leadership & Managing People sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Founder's Xin in the Leadership & Managing People industry. The Leadership & Managing People industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Shortening product life cycle
– it is one of the major threat that Founder's Xin is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Founder's Xin business can come under increasing regulations regarding data privacy, data security, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Founder's Xin will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing wage structure of Founder's Xin
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Founder's Xin.
Regulatory challenges
– Founder's Xin needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Leadership & Managing People industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Founder's Xin with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Founder's Xin high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Founder's Xin demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Weighted SWOT Analysis of Founder's Group Diversification Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Founder's Group Diversification needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Founder's Group Diversification is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Founder's Group Diversification is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Founder's Group Diversification is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Founder's Xin needs to make to build a sustainable competitive advantage.
